Posts Tagged ‘internal audits’

CARSON CITY – Nevada’s Tax Department could enhance its audit efforts by adhering to its own risk assessment formula for determining which businesses to review for compliance, an audit released today said.

The audit of the agency by the state Division of Internal Audits found that it does not follow its risk assessment results when determining which businesses to analyze for potential tax collections.

“Review of the sales tax audits performed in calendar year 2010 revealed the department only selected a few of the businesses it deemed to be the highest risk,” the report said.

The audit found that Tax Department staff rely instead on a supervisor’s judgment of which businesses to review. The agency also performs smaller audits to ensure a high number of reviews.

“Using the audit supervisor’s judgment and pursuing smaller audits negates the use of risk assessment when selecting audits,” the review said.

The audit also recommended that the agency consider reallocating its audit staff after updating its risk assessment process.

The audit of the agency was reviewed today by the Executive Branch Audit Committee.

William Chisel, executive director of the Department of Taxation, accepted all of the audit recommendations. Chisel took over the agency in September after serving as chief of internal audits.

Tax Department chief William Chisel. / Nevada News Bureau file photo.

“We’re moving forward on the risk assessment, which has already been implemented,” he said. “As far as resources to implement the collections process, that’s going to be done through internal resources, in other words we’re going to amend our current computer system to address the changes that we need to redesign our collection process.

“Hopefully this will help us maximize our resources, and I think that is what we’re going to get out of this,” Chisel said.

Internal auditors said that a survey of six other states showed they all use risk assessments to select sales tax audits. A 2004 audit of the agency found that Michigan increased its violation findings by 10 percent after converting to a method of selecting taxpayer audits based on risk.

“The department should emphasize the amount of taxable sales as the primary risk component when selecting audits,” the review said. “As taxable sales increase, so does the number of errors in dollars reported. However, our review of Nevada’s audits based on taxable sales shows it has not emphasized higher taxable sales when selecting audits.”

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Audio clip:

Tax Department Director William Chisel says the audit recommendations are being implemented:

CARSON CITY – Audits of two state mental health programs reviewed today identified a number of serious findings, from physicians working only a few hours a day to questionable and potentially fraudulent bills for services to the mentally ill.

In one case, the Division of Mental Health and Developmental Services is investigating a provider who billed for services to a mentally ill client even though the individual was hospitalized at the time.

Harold Cook, administrator of the agency, said it appears as if there was a “deliberate attempt to deceive us.”

Cook acknowledged that other billings identified in the audit of the residential support programs, where services are provided to mentally ill clients, were “egregious” and “inappropriate.”

The review by the Division of Internal Audits identified numerous cases of questionable expenses, including paying supplemental rent to a client who had spent money on tattoos, $150 biofeedback sessions and $175 on Christmas cards.

The audits were reviewed by the Executive Branch Audit Committee, which includes Gov. Jim Gibbons, the other state constitutional officers and a representative of the public.

Gibbons said the audits show there are people trying to take advantage of the state, and called the findings troubling because they are evidence of a systemic problem.

“And it doesn’t speak well of the people who are submitting the billing or trying to take advantage of the state’s fiscal condition at this point in time,” he said. “The state of Nevada is not for sale. The state of Nevada should not be defrauded.”

In another case cited in the audit, a provider submitted reports that were identical from month to month except for the editing of dates. The same provider showed a charge for 2.5 hours to “meet a client at a restaurant and count change.”

Another provider billed for taking a client on eight-hour bike rides and massage.

Another involved $80 to $105 payments for music therapy with no supporting documentation.

One billing was for more than $1,000 a month on services identified only as, “in home discrete trial.”

Another was for $369 for action lessons with no evidence the service met a client’s needs.

Another case involved a billing from a provider for a client who was missing for over a week.

The claims were approved and paid by the agency with no evidence they were questioned, the audit found.

The audit said the agency could save at least $650,000 a year by clarifying policies for expenditures and improving monitoring. All 11 recommendations were accepted by the agency, although Cook noted in his response that the questionable spending amounts to less than one half of one percent of the $110 million budget for these services.

Cook said there are 5,000 providers, some of whom generate hundreds of bills each month that must be reviewed by staff.

“Sometimes we miss them,” he said.

The second audit reviewed the operations at the agency’s two psychiatric hospitals and 24 out-patient clinics, and found a number of physicians employed by the state were not working full days.

In one case, a doctor who worked at the Rawson-Neal Hospital in Las Vegas averaged two hours a day.

The audit found that on average, none of the doctors, who earn as much as $170,000 a year, worked full days.

“We were able to identify one day in the four months when one of these doctors worked a full day,” the audit said. “We estimate the division lost up to $1.7 million from doctors’ attendance problems at the Rawson-Neal Hospital in fiscal year 2009.”

Cook said the doctor who only worked two hours a day is no longer with the agency. Three other doctors with attendance problems are also gone, he said.

Cook said the expectation is that all state employees will put in an eight-hour day.

The agency is looking at privatizing the medical services as a way to address the issue going forward, he said.

All 11 audit recommendations were accepted by the agency.

Gibbons said the audits help pinpoint problems so fixes can be made going forward. The audit of the agencies is critical to ensuring the state meets its fiduciary obligation to taxpayers.

“We need to know where our weaknesses are, we need to know where the state can do better,” he said.